JG/Government to Set 3% Tariff on CPO Exports

In a bid to stabilize domestic palm oil prices, Indonesia is expected to institute a 3 percent tax on crude palm oil exports next month, Trade Minister Mari Pangestu said in Jakarta on Tuesday.

“The local price will be affected by the rising global CPO price as a number of producers would prefer to export their products rather than sell for local consumption,” Mari told reporters.

In addition to putting the 3 percent duty in place, the government also expects to raise the base price on which the tax is to be calculated, from $560 per ton to $700 per ton, according to the ministry.

The tariff is expected to be based on the benchmark price in Rotterdam, which averaged $774 per ton between April 20 and May 19.

The Trade Ministry scrapped a 7.5 percent export tax on CPO in November when prices plummeted by 48 percent in the global economic downturn before recovering by 43 percent this year.

Gandhi Sulistiyanto, the managing director of PT Sinarmas, which exports about 20 percent of its output to China, Europe and India, said imposition of the tax would hurt the industry, cutting into their competitive edge with other producers.

“The decision means that Indonesia will no longer be able to compete with its main rival, Malaysia, because the Malaysian government has no export tariff for CPO,” Gandhi said.

“Raising the tariff will cause Indonesian palm oil prices to be more expensive than Malaysia’s.

“We will follow the new tariff with the expectation that the CPO price will fall in the second semester as we enter the harvest season,” Gandhi said.

CPO plantations in Indonesia produce about 20 million tons per year, of which 3 million is allocated for domestic consumption. Malaysia, the world’s second-largest grower, produces 19 million tons per year.

“The export volume will decrease but the [domestic price] will be stable,” Mari said. She did not indicate how much export volumes might fall.

Imposition of the tariff follows an attempt in February by the Trade Ministry to put a subsidy program in place to keep local prices stable. However, the plan was rejected by the House of Representatives.